EU Chamber of Commerce warns China to reduce overcapacity Anyone who declares their food purchases via the federal app is paying too much

The European Union Chamber of Commerce in China has called on the government in Beijing to reduce the pressure caused by overcapacity. The Chamber hopes that the government will support demand in the country and thus take the pressure off trade tensions between Europe and China, Chamber President Jens Eskelund said in Beijing on Wednesday.

“Overcapacity has become a clear problem. And what worries us at the moment is that it seems to be spreading across all sectors.” As examples, Eskelund cited the automotive industry and the solar energy sector, where prices have plummeted year after year.

In Germany, for example, solar manufacturer Meyer Burger stopped producing modules at its factory in Freiberg, Saxony, last week. The Swiss company recently announced that preparations for the closure of the factory are still being made. Another reason was the strong competition from cheap solar panels from China.

According to Eskelund, overcapacity is a burden, which essentially means producing more products than there is demand for. In some sectors this puts pressure on profitability, in other sectors it concerns the ability of companies to survive. The problem affects not only European but also Chinese companies, he said.

Where the overcapacity comes from

The fact that there is currently overcapacity in China is due to the fact that there are no market mechanisms in the People’s Republic, according to a former President of the EU Chamber. According to him, many of the approximately 150,000 state-owned companies and the approximately 140 car companies should go bankrupt, but that is not happening because of local subsidies. The problem of oversupply can therefore only be seriously tackled if companies go bankrupt, as in a market economy.

China’s industrial policy also supports too many manufacturers on the supply side and not on the consumer side, another ex-chairman of the House said in a discussion. “If you want to use subsidies, give them to the consumer. This will help avoid the problems China has gotten into,” he said.

EU companies are increasingly concerned

Chinese overcapacity and the Brussels anti-subsidy investigation against car manufacturers in China have been putting pressure on relations between the two important trading partners for some time. This also has consequences for the business climate for foreign companies in China. As a report from the EU Chamber presented on Wednesday shows, the concerns of EU companies operating in the People’s Republic have “increased exponentially” in recent years.

Companies are therefore investing more money than ever before in mitigating risks to their business or in compliance measures in China. Many of the chamber’s approximately 1,800 member companies reported that it was becoming increasingly difficult to do business in China. (rbu/sda/awp/dpa)